India and Oman free trade agreement Expected in Next Month

Negotiations for the anticipated Free Trade Agreement (FTA) between India and Oman are progressing swiftly, with indications pointing towards the signing of the pact next month, as stated by a high-ranking government official. The proposed agreement is poised to benefit various export sectors, such as motor gasoline, iron and steel products, electronics, machinery, textiles, plastics, boneless meat, essential oils, and motor cars. According to a report, these goods at present face a 5 percent import duty in Oman. About 16.5 percent of Indian exports to Oman, worth about USD 800 million and goods such as wheat, medicines, basmati rice, tea, coffee and fish that already have duty-free access, will not see additional benefits from the agreement, it added.

Currently, over 80 percent of its goods enter Oman at an average of 5 percent import duties, the report has said. Oman's import duty ranges from 0 to 100 percent along with the existence of specific duties. A duty of 100 percent is applicable on specific meats, wines and tobacco products. Officials of the two countries concluded the second round of talks for the pact, officially dubbed as Comprehensive Economic Partnership Agreement (CEPA) earlier this month in Muscat.

Both sides have reached conclusions in the negotiations regarding the text of the majority of the chapters. Among the Gulf Cooperation Council (GCC) countries, Oman stands as India's third-largest export destination. India has previously established a comparable agreement with another GCC member, the UAE, which became effective in May 2022. Regarding imports, India recorded merchandise imports from Oman amounting to USD 7.9 billion in the fiscal year 2022-23.

Key imports are petroleum products (USD 4.6 billion) and urea (USD 1.2 billion). These account for 73 percent of imports. Other key products are propylene and ethylene polymers, pet coke, gypsum, chemicals, and iron and steel. GTRI's report has stated that Oman's products, particularly in sectors like oil and gas, petrochemicals, and certain types of manufactured goods, will find a more receptive market in India, post-implementation of the trade agreement.

On the services side, it added that, in 2022, India's service exports to Oman were worth about USD 2.8 billion, while its imports were USD 0.2 billion. "Oman's population is about 5 million. Oman's higher per capita income (USD 25,060) compared to India's (USD 2,370) could mean a demand for more diversified and possibly higher-value goods and services in Oman, which India could aim to supply", GTRI Co-Founder Ajay Srivastava has said.

In the fiscal year 2022-23, the bilateral trade between the two nations amounted to USD 12.39 billion. India's export figures have witnessed a notable rise, climbing from USD 2.25 billion in 2018-19 to USD 4.48 billion in 2022-23. Concurrently, imports from the Gulf nation reached USD 8 billion in the last fiscal year. Such agreements typically involve a substantial reduction or elimination of customs duties on a wide range of traded goods. Additionally, they facilitate the easing of norms to encourage trade in services and attract investments.

Experts have stated that beyond the immediate economic benefits, the CEPA holds considerable strategic importance for India. It serves as a gateway for India to strengthen its footprint in Middle Eastern economies. This partnership with Oman can act as a catalyst, enhancing India's geopolitical presence and fostering deeper ties with other Middle Eastern countries. Commenting on the proposed pact, international trade expert and Hi-Tech Gears Chairman Deep Kapuria said this would further help India in consolidating its market access not only in Oman but also enable Indian companies to access the wider Middle East region.